Wind Turbines – Fixture or Chattel?
05/10/2021
Valuer General Vic v AWF Propco 2 Pty Ltd [2021] VSCA 274 handed down. The Victorian Court of Appeal has come to an unanimous judgement that ‘above ground assets’ installed on leasehold land are chattels and not fixtures.
In the latest in a series of cases on wind turbines installed on leasehold land, the Victorian Court of Appeal in a unanimous judgement has found that the ‘above ground assets’ including the towers, rotor blades and nacelles making up the wind turbines were chattels and not fixtures at common law.
As an alternative ground, if the assets were fixtures, they were tenant’s fixtures and s154A of the Property Law Act had the effect that they retained their character as chattels and did not become part of the land.
The case is in stark contrast to the recent decision of the NSW Supreme Court in SPIC Pacific Hydro Pty Ltd v Chief Commissioner of State Revenue. Both cases involve very similar facts, but the outcomes are diametrically opposed.
SPIC Pacific Hydro case
In the SPIC Pacific Hydro case Payne JA decided that the wind turbines were part of an integrated electricity generation facility. The turbines were integral to the functional use of the land as a wind farm operation and therefore were fixtures. Payne JA considered that the terms of the lease (which required the assets to be removed and the land restored at the end of the lease) was not determinative. The intention of annexation had to be determined objectively and the terms of the lease between the parties was not decisive. Payne JA considered the decision of the first instance judge in AWF PropCo but declined to follow the Victorian Supreme Court decision as he considered the Victorian judge had placed too much weight on the terms of the lease.
The Victorian Court of Appeal considered that that Payne JA overstated the primary judge’s reliance on the lease arrangements and concluded:
Accordingly, we consider that the primary judge was correct to have regard to the terms of the AWF Leases and the right and obligation to remove the above ground AWF Assets as relevant to her finding that they are chattels. It is not correct, as submitted on behalf the Valuer-General, that the primary judge weighed evidence regarding the subjective intention of the parties instead of applying the common law test requiring an objective assessment of the purpose or object of affixation.
The Victorian court of Appeal also took a different view to Payne JA on whether the turbines were part of an integrated electricity generation facility, concluding that:
The above ground AWF Assets form part of a single power generating facility. They were installed on the land for that specific purpose. However, they are not homogenous and the degree of integration of the individual items is limited. There is a connection by cable and by road between the substations, the buildings and the wind turbines. However, each wind turbine functions as an asset in its own right and does not rely on the other turbines in order to function. As the wind turbines are not interdependent, any one or more of them can be shut down while others remain in operation. AWF Prop Co can at any point remove turbines — whether for replacement, repair, refurbishment or simply to reduce the number of turbines. Clearly the substations, buildings and cabling have no purpose without operational turbines, but they are not dependent on there being a particular number of turbines.
In our view, the extent of integration does not speak to the AWF Assets being fixtures. This is particularly so having regard to the fact that the operator can come onto the land pursuant to its leasehold rights and, in a matter of just a few days, take out important items —one or more of the wind turbines — without impact on the other items.
Consequently, we now have two Supreme Court authorities – one in NSW and one in Victoria – that are at odds with each other.
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If you believe that you may have been affected by this judgement or have any questions, please contact your SW advisor or one of our experts below.
Robert Parker
Carmelin De Francesco
